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Crypto Solutions in Bahamas
The emergence of cryptocurrencies has brought a kind of challenge to the global financial sector, in fact, some countries such as the United States have already taken steps to regulate their use within their economy.
We have seen the growth of this industry in recent years, but like most things on the internet, it lacks a regulatory system or official recognition by the world's governments.
It is common for central banks and other government financial institutions to warn their citizens of the risks involved in investing in the world of cryptocurrencies, especially because of their high volatility, as well as the fact that because they are in such an "anarchic" system, and they are likely to be used for criminal purposes.
To assume cryptocurrencies as an official financial medium, governments must first create anti-money laundering mechanisms and cyber protection laws, as there have been many issues to deal with when it comes to cryptocurrencies, such as:
-Tax evasion. It’s very common as crypto transactions are normally done anonymously and some individuals take advantage of this fact.
-Money laundering and financing of criminal activities. As this industry is commonly driven by anonymity, no transaction on these networks has any identity to look for when searching for suspicious financing patterns, which make it difficult (or impossible) to track these kinds of operations.
-Unstable valuation of crypto-assets. There are no type of regulations, laws or mandates to give some stability to the tokens, which might cause the full collapse of some assets from one day to another.
However, in the Bahamas, the existence of cryptocurrencies has not been overlooked, and they have decided to work on legislation to validate them within their jurisdiction.
In 2017, the country's central bank mentioned that its legislation for the "system of national electronic payments services" is also binding on cryptocurrencies, as if they were a type of digital asset.
In early 2019, they would take a crucial step into the world of cryptocurrencies by announcing "Project Sand Dollar", which would be the name for their new payment system in search of modernisation in this regard. The idea was to gradually decrease cash transactions and make way for a digital system, according to central bank governor John Rolle.
Despite all the challenges that crypto represents, official government insiders can also see why it attracts people's attention, given that its decentralised nature, lower transaction fees, fraud protection (consolidated exchanges), among others, has made citizens of various countries interested in this industry.
Digital Assets and Registered Exchanges (DARE)
In 2019, Bahamian legislation created DARE to take a small step towards a proper regulatory system for cryptocurrencies. This law covers some services, as well as making it clear that a digital asset is a representation of value distributed through a DLT Platform without any limitation of digital tokens.
In enacting this law, Bahamian officials sought to include within this legislation all services that are related to:
-Digital token exchanges
-Custody of digital asset services
-Sponsorship of initial token offers
-Every activity that the commission may prescribe by rules
This legislation seeks to regulate cryptocurrency transactions that take place within the territory of the Bahamas, as well as the services offered that involve this industry.
The registration of all exchanges would be included in this new law, as well as covering exchanges that cover fiat-to-crypto and crypto-to-crypto transactions, taking into account centralised and decentralised exchanges alike.
The Bahamian government's entry into the cryptocurrency space involves regulations on who can participate, how much minimum capital an individual must have to enter and the penalties that would apply when an individual or company is in breach of this legislation.
In addition, they mention the points of anti-money laundering law and measures to prevent the financing of terrorism in any form, where individuals involved in this industry must adhere to these as well, as well as protect and safeguard the data of all customers.
The law aims to be as broad as possible in order to leave as few loopholes as possible where individuals can take advantage of the freedoms offered by cryptocurrencies in terms of anonymity and other aspects.
In general, a government that promotes the regulation of an industry such as this seeks to protect citizens with aspects such as their capital or, more importantly, their identity or other relevant data that can be used for other purposes by other individuals in an illegal manner.
The Central Bank of the Bahamas through its latest resolutions has sought that the citizens of this country can have facilities to deposit or withdraw money from foreign assets without major problems, even the governor of this entity in 2019 said that it was easier to reestablish the financial system digitally after a catastrophe such as a hurricane.
Plus, a clear objective is the modernisation of the country's financial system, and the flexibility of payment methods in various areas, so they even created their own digital currency called "Sand Dollar", but for this, they had to establish some rules with the exchanges.
Why Did the Bahamas Create a Digital Currency?
In 2020, despite all the challenges that have been generated around cryptocurrencies and digital assets, the Bahamas is the first country to officially create its own digital currency, while other countries are still considering it.
The "sand dollar" is authorised throughout the territory of the Bahamas, given that banks sometimes have limited reach to operate and, besides, businesses in this country do not always accept credit cards as a method of payment, so this measure adds a little of financial flexibility to its citizens.
The Central Bank governor said that while there are some places in the Bahamas with a relatively advanced economy, not all places have access to banking institutions, so it was necessary to create a digital asset to which all citizens could have equal access, thus facilitating the flow of money in the country.
Modernising the country as citizens become accustomed to using digital wallets is a way to increase economic operability within the country, especially in those rural locations where it was difficult.
What is certain is that the Bahamas took a small step forward in terms of legislation in the use of cryptocurrencies, exchanges and its own digital assets to give a boost to the country's economy.
There may still be some details to be addressed in the future, but the important thing is that as time goes on, this industry is gaining influence, but also becoming more operational as governments look to establish some rules.
At Mundo we can advise you on the best way to enter the world of cryptocurrencies or to get involved in the legislation of the Bahamas, do not hesitate to ask us for help.
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